Open Source Business Models

5/20/2018 Open Source Business Models

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FOSS Business Models

Satish BabuExecutive Secretary, SPACE

President, InApp Infotech, Technopark


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Overview

FOSS: A retrospective

The FOSS Marketplace

Business modelsStructuring FOSS Businesses

Conclusion


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FOSS: A retrospective


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The last decade

The emergence of FOSS as mainstream: an

extraordinary feat

The Linux kernel today runs on every kind ofdevice, from mainframes to embedded chips

GNU/Linux distros have put FOSS on millions of

homes and offices


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Last decade (2)

The spirit of FOSS has since spread to other

domains such as media and knowledge

There have been several attempts to challengethe FOSS model (eg., the case of Novell)

However, these have been unsuccessful and has

proved costly for those that have tried


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GPL as a Social Contract

GPL is founded on copyright law

GPL has been challenged in court and has been

upheldBut much more than the law, it is the FOSS

community that is the jury

The community has been successful in advocacy(eg., EU) and in defending GPL (eg., 'patent

busters')


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The FOSS Marketplace


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FOSS Market

Some people consider FOSS to be commodity

(ie., generic, easy to switch between,

producers unable to influence markets...)However, this has largely been shown to be

incorrect

The FOSS market is much like a branded

product, with strong customer loyalties


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The FOSS market

The freedom to resell FOSS doesn't necessarily

mean pushing out the original producer (eg.,

Oracle vs. RedHat)Unlike the traditional software market, a diversity

of creative revenue streams exist for FOSS


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FOSS Market Drivers

Generally not price competitive

User-centric, participatory development

Community presence extremely important (ie.,forums, user groups)

Compliance to open standards

SaaS model is viable for many verticalsThe perpetual beta: continuous evolution


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Market Drivers (2)

Leverage the long tail

Reduce barriers to participation

Think multiple devices (iPod, mobiles), services(location services, GPS) and models (mash-ups)

Third-party developers very important forsuccess of software

Users add value


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Market Drivers (3)

Often associated with a decentralized, distributed

development process

Harmonious with agile thinking (eg., faster time-to-market vs. increased production)

Fosters innovation through access to

information, a culture of sharing, high degree

of competence and pride in work


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FOSS Business Models


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Selling Software

The simplest revenue stream

Can apply to distros and applications

Usually, prices are far below proprietaryequivalents

Can be a barrier for widespread use; a pooreruser community


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Technical support

Product sold cheap

Technical support charged

Support could be phone- or email-based orthrough service calls

RedHat is a good example


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Decentralized support

Small FOSS Virtual Micro-Enterprises (VMEs)

can take up support at the grassroots level

Through this, villages and small towns can beprovided with technical support

By networking between VMEs, synergy can be

built up


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Dual licensing

Many products come with dual licenses: a

community license which is zero-cost andGPL'ed and a proprietary version

This way, users contribute to the free version

and the company finds it easier to maintain theclosed version

There will be some revenue loss

MySQL, ReiserFS are examples


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Solution Integration

This may include:

Setting up intranets

Setting up mail serversRecommending email and web usage policy

Securing company IT assets

Auditing security and compliance

Recommending a combination of FOSS applicationsand integrating them together


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Solution integration (2)

Porting of historic data to newly-installed FOSSapplications

Providing IT consulting services

Recommending phase-in and phase-out policies forIT assets

Can be a good revenue-earner for top-class

consultants


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Widget frosting

Describes the practice of selling hardware and

GPLing the software required for the hardware

The revenue stream from the hardware cross-subsidizes the software costs

A good example is Asterisk, the powerful

electronic PABX software, distributed by

Digium


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Distribution with hardware

Many resellers of commodity hardware create

additional value by loading FOSS-basedsoftware applications

Usually, this is done at the time of sale, but this

can be done later (eg., new releases)


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Referrals and Advertising

FOSS applications earn considerable revenues

through referrals

Google paid Firefox USD 57 million in 2006 forreferrals through the Google Toolbar

Any product that uses a service (eg., IM, Net

Telephony) can benefit from this model


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Selling Documentation

Companies can earn revenues by creating and

selling documentation

These may include books, user manuals,tutorials, FAQs, videos, and podcasts

These are typically sold online


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Training services

FOSS companies can earn revenues by

providing training services

For example, whenever large companies shiftinto FOSS (eg., from MS Word to OpenOffice),

large groups have to be retrained

Numerous opportunities exist, for example, in the

Government


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Extending applications

Sometimes companies want extensions carried

out to existing FOSS applications

These customizations are typically for internaluse as redistribution would violate GPL terms

(unless source code is also distributed)


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Add-ons

Developing third-party add-ons are a lucrative

FOSS-based business opportunity

Scrabulous is a good example of a game thatmade it into PC Magazine's 100 best products

of 2008

Mozilla add-ons are another example


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Generating content

Generating on-line content through many ways:

Data entry

Proofing and editingLocal information portals

3-D Animation

Photo-editing

Some of these can provide employment to largenumbers of people


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Software Development

This refers to custom software development on

FOSS platforms

There is no community process here, so the rigorof user-audit is lost

Typically done for Governments or large

corporates

Software so produced is consumed internally

and not generally redistributed


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Funded R & D

In some cases, FOSS products may be funded

for R & D

Some examples are:Embedded systems

Community projects

Military applications

Disaster-management systems

Computing for the differentially-abled


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Porting applications

In many cases, FOSS is an attractive alternative

to end-of-the-road proprietary platforms

In these cases, existing applications need to bemigrated to FOSS platforms

There is a vast opportunity in this work,

especially in corporates


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Structuring

FOSS Businesses


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Structuring FOSS Businesses

Several options are available for structuring

FOSS businesses:

Corporate (eg., RedHat)

Company

Collectives and co-operatives

The Micro-enterprise

The individual consultant


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Conclusion


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In conclusion...

FOSS has become a mainstream model for

creation, use and distribution of not justsoftware, but also for other knowledge artifacts

FOSS offers several business, revenue and

employment models, ranging in size from themassive to the micro


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Thank you

Open Source Business Models

Documents

spirit of foss

foss market driversgenerally

beincorrectthe foss

open standardssaas model

challengethe foss model

models mashupsthird

foss marketthe freedom

foss marketsome people